Reimbursement procedure not impacting coverage within plain language of ACA

By Leah S. Poniatowski, J.D.

A health insurance plan administrator did not violate the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) or the Employee Retirement Income Security Act of 1974 (ERISA) when it changed its reimbursement procedure to pay patients directly, instead of the service provider as had been done, because the change did not affect the coverage the plan provided under a plain reading of the ACA and related regulation, the federal district court in Connecticut ruled (Hartford Healthcare Corp. v. Anthem Health Plans, Inc., November 1, 2017, Hall, J.).

The participating partner relationship between Hartford Healthcare Corp., a health system including affiliated hospitals, and Anthem Health Plans, Inc. ended on October 1, 2017, after Hartford elected not to renew the agreement. Effective that date, Anthem stated that Hartford would no longer be reimbursed directly; Anthem would provide payment to its members and beneficiaries, who would pay Hartford for the services they received. Hartford filed a lawsuit against Anthem alleging violations of the ACA and Connecticut law, seeking a declaratory judgment on the statutory claims and a permanent injunction prohibiting Anthem’s post-October 1 reimbursement method. Hartford amended its complaint to add an individual member of an Anthem-administered health care plan, and added claims under ERISA and state contract and quasi-contract law.

Hartford argued that Anthem’s reimbursement procedure will cause plan members to suffer because they will be burdened with the responsibility of reviewing benefits paperwork, depositing payments and reimbursing Hartford, and pursuing incorrect payment issues. Hartford added that these challenges may lead plan members to delay emergency medical care or seek care at another facility either less prepared to provide the needed care or at a distance and, thus, irreparably harm the plan member. Hartford also claimed that it would be harmed by waiting longer for payments from patients, devoting resources to managing patient payments, and losing income to other in-network hospitals. Anthem filed the present emergency motion to dismiss the claims.

Prohibited conduct. The court held that the plain reading of the applicable statutory and regulatory provisions supported Anthem’s position that its reimbursement procedure was not prohibited by law. First, the ACA provision (42 U.S.C. § 300gg-19a(b)(1)) indicates that requirements related to prior authorization and limitations on coverage are prohibited in the context of emergency services. The court observed that there was no explicit language requiring insurers to eliminate distinctions between in-network and out-of-network providers, and that Hartford did not argue Anthem’s reimbursement procedures were a requirement of prior authorization.

The court agreed with Anthem’s construction of the term "coverage"—that it refers to the type or amount of benefits or services provided by a plan, not how the insurer pays for those benefits or services. Additional support for this position is reflected in how the term "coverage" is construed in insurance case law (does not include how payments are made), and examining the provision in the context of the whole statute (noting cost-sharing subpart would be redundant if cost-sharing requirements were to be included in "limitations on coverage"). Similarly, the court construed "administrative requirement" narrowly to be consistent with the ACA, explaining that paying plan members directly is not a requirement on coverage.

The court acknowledged that Anthem’s reimbursement procedure does burden the plan members and Hartford, but no argument was made that coverage for emergency services would be affected. Thus, as a matter of law, Anthem’s group health plan does not violate the ACA when it sends reimbursements to patients instead of directly paying the health care service provider. Because the ERISA claims were based on the ACA claims, all counts concerning violation of federal laws were dismissed. The court declined to exercise supplemental jurisdiction over the remaining state law claims in light of the complex and novel issues of state law presented by Hartford’s lawsuit.